A Supplement to the NPC Reports:
U.S. Petroleum Product Supply  Inventory Dynamics, 1998, and
U.S. Petroleum Refining  Assuring the Adequacy and Affordability of Cleaner Fuels, 2000

This 2004 report responds to a request from the Secretary of Energy for the National Petroleum Council to provide advice on issues surrounding domestic refining capacity, product imports, and inventories. The Secretary requested that the Council’s advice be provided on an expedited schedule.

This report presents the National Petroleum Council’s analysis of the dynamics of U.S. petroleum product inventories.
It answers specific questions, the most challenging of which asks whether the market-driven efficiency gains seen in the petroleum product supply system over the past several years have inadvertently increased the public’s exposure to larger and more frequent retail price swings. The report analyzes historical inventory trends and price swings through mid-1998, and identifies factors affecting volume and price movements. The primary focus of the study is on major light petroleum products (gasoline, distillate, and kerosene jet fuel) in the primary distribution system.
Because the supply of crude oil is fundamental to the ability of the refining system to supply products, the study also investigates U.S. crude oil inventory.

Specifically, the report:

Reviews the role of inventory in the major light petroleum products market and provides an overview of the size, scope, and segments of the global petroleum business.

Develops supply/demand balances based on estimated changes in demand, U.S. refining capacity, and gasoline import availability to determine if the U.S. product supply system is becoming more tightly constrained and if the probability of price swings will increase.

The report provides data and analyses on U.S. oil and gas inventories, and storage and transportation capacities. The study updates the Council’s 1979 and 1984 studies on these subjects as well as analyzes the response of the distribution systems during periods of stress. Petroleum Storage & Transportation is presented in five volumes:

Volume II, System Dynamics, describes how the system operates both in normal times and during periods of stress. This volume examines possible responses to six unlikely but highly stressful situations including import disruptions and pipeline outages. The volume also summarizes major changes to the distribution system since 1979.

Volume III, Natural Gas Transportation, describes the capability of the natural gas system as it exists today. This volume outlines the regulatory history of the industry; updates the factors affecting gas supply and demand; summarizes pipeline capacities, interconnections, and storage; and analyzes the capabilities of the national pipeline network under normal and stress conditions. Natural gas pipeline and storage data were collected by survey and are provided in maps and tables.

Volume IV, Petroleum Inventories and Storage, estimates inventories and storage capacities for the primary, secondary, and tertiary systems. New estimates of minimum operating inventory levels for the primary system are also provided.

Additionally, the impact of petroleum futures and forward markets and the Strategic Petroleum Reserve on inventories are examined. The volume’s data were collected mostly by survey and are provided in tables.

Volume V, Petroleum Liquids Transportation, presents information on all forms of transportation of crude oil, refined petroleum products, and liquefied petroleum gases. These include pipelines, tankers, barges, tank trucks, and rail cars. This volume presents petroleum pipeline capacity data that were collected by survey. An inventory of waterborne transportation equipment and an examination of navigational structures and waterways is also included, as well as an examination of the U.S. tank car/tank truck fleet. The volume’s data are provided in maps and tables.

The report analyzes the nation’s primary petroleum distribution system and presents detailed estimates of inventory and storage capacity in the secondary distribution system and tertiary storage segment. The many structural and operational changes that have occurred in the system since the NPC’s previous analysis in 1979 are also considered. Topics discussed in the report include: minimum operating inventory for crude oil and the principal fuel products; total storage capacity and inventory estimates for the primary, secondary, and tertiary systems; an analysis of the dynamics of the petroleum distribution systems; and the impact of the petroleum futures markets.